Many poker players want to win big at the Main Event, but do they also have to think about how much tax they’ll pay? It’s important for poker professionals to know how the game works from a tax perspective so they can plan accordingly. This article will break down the process and answer the question, “do poker players pay taxes?”
The IRS requires that professional poker players report their winnings as self-employed income. The process is similar to how any other professional would file their earnings. The key difference is that professionals can deduct a lot more expenses, including office expense, meals, travel, poker training memberships, and books. The benefit of this is that it helps to lower the player’s tax bracket. However, the downside is that it also means that professionals will be liable for Social Security, whereas amateurs are not.
Are Winnings from Online Poker Taxable?
When it comes to winnings from online poker, the UK’s Revenue & Customs (HMRC) will treat them as income. This includes any prize money received from winning a tournament, regardless of the amount won. This also includes free seats to tournaments.
While this isn’t necessarily a problem, it’s something to keep in mind when planning your strategy for winning. This is especially true if you’re an avid player who enjoys traveling to different countries to play the game. While there are a number of states that don’t impose an income tax, the rest will require that you pay taxes on your winnings.
This is one of the primary reasons why it’s best for poker pros to work with a Certified Public Accountant who specializes in filing taxes for gamblers. The accountant will be able to help you determine the appropriate tax rate for your situation and give you advice on how to maximize your deductions.
Another issue that many poker players face is whether or not they can write off their losses. The short answer is yes, but it’s not quite as simple as that. In order to claim your losses, you must have detailed documentation of your winnings and losings. This will include the date of activity, location, and the total amount won or lost. This documentation can be submitted with your taxes in order to recover any taxes that were withheld.
Keeping Detailed Documentation
Poker players who live in the US will be subject to 30% income tax withholding on their winnings. However, you can claim this back by submitting the proper documents to the IRS at the end of the year. This process can seem daunting, but it’s actually not too difficult for most people.
The best way to protect your profits is by establishing a corporation. Kondler recommends this option for professionals because it shields them from some of the liability associated with Social Security, and it’s less likely to be audited than Schedule C filings from sole proprietors. The downside is that this type of structure is more expensive up front, but it can save you a lot of money in the long run.